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February 12, 2019

White oil pipeline: ECC likely to give go-ahead today

Top Story

February 12, 2019

ISLAMABAD: The Economic Coordination Committee (ECC) is likely to give go-ahead for another white oil pipeline today (Tuesday) that is to be laid down from Machike to Taru Jabba (MTJ).

If the project gets the ECC’s green light, it will be completed by the Inter-State Gas System (ISGS) not in dollars, but in Pak rupee with no escalation. However, interestingly the Ogra has given the license to the FWO (Frontier Works Organization) allowing it to lay down the pipeline [from Machike to Taru Jabba] and refused to provide the licence to ISGS. The FWO wants to build the pipeline in dollar terms.

The ECC will also take up other issues including approval of government support required by the Pakistan International Airlines Company Limited; necessary amendments or exemptions required for the Gwadar Port and Gwadar Free Zone; new criteria for issuance of petroleum products marketing licence and a plan for improving cotton crop in Kharif 2019.

However, a Petroleum Division official said for the first time in the history of Pakistan, on April 2018, the ECC that met with Prime Minister Shahid Khaqan Abbasi in the chair had already approved Machike-Taru Jabba (MTJ) oil pipeline project, but later on the FWO entered the game wishing to build the pipeline parallel to the route of the pipeline that has been proposed by the ISGS. The ECC will factually decide the fate of the pipeline proposed by the ISGS.

The Inter-state Gas system will implement the project on BOOT (build, own operate and transfer) basis in local currency with no escalation. However, after 15 years’ time, the pipeline will be the asset of government. Not a single penny will be spent on the project by the Government of Pakistan, a senior official who was part of the government told The News.

The official explained that the tariff structure of the pipeline comprised fixed and variable tariffs that will not be in dollar terms rather both the tariffs will be in Pakistan rupee with no escalation for 15 years as compared to the trucking tariff, which will escalate monthly over a similar period. A composite tariff comprising fixed and variable tariff and calculated based on the projected throughput was determined. The composite tariff quoted is approximately 60 percent less in terms of present value vis-à-vis the current trucking rate.

“This would result in saving of approximately Rs100 billion to the national exchequer during the entire BOOT period, and result in reduced cost to the consumer. Furthermore, as per the BOOT contract, pipeline asset will be transferred to a nominated government entity after 15 years at the price of one rupee only. Resultantly, a tariff will be negligible since only the operating cost needs to be recovered.”

The consultant in the related techno-economic feasibility report opined that the project is financially viable and will result in significant saving to the government exchequer over the life of project when compared with the prevailing road freight besides ensuring safe and study oil supply from Karachi to Peshawar.

In addition, the accrued primary benefits will reduce emission levels, prevent adulteration of products and reduce product loss.

The project will also ensure safety by reducing road accidents, congestion on roads because of oil tankers and lower road maintenance cost. It will also provide better security to product supplies for strategic defense needs. In addition, the economy will improve further in future as the pipeline has the potential for increase in throughput up to 10 MMTPA. The project will also add storage facility of 48,000 metric tons at Machike, 22,000 MT at Chakpriana, 60,000 MT at Rawat, and 75,000 MT at Taru Jabba in addition to 20,000 MT of storage as batch storage each at Chakpriana and Rawat as well as line fill.

Managing Director Inter-State Gas System Mobin Saulat is the person who had played a pivotal role in laying down the oil pipeline from Karachi to Kot Addu at the site of Pak-Arab Refinery Company (PARCO). He has a rich experience and in the past he had the credit of materializing the import of RLNG in the country apart from successfully negotiating the gas sales purchase agreements of IP and TAPI gas lines. Now the ISGS under his leadership has been mandated to complete the Machike-Taru Jabba (MTJ) oil pipeline project. To a question, the official said two bidders namely CISS Pakistan and a consortium CJT comprising three companies China Energy Construction International Corporation (china), Jereh Oil and Gas Engineering Corporation from China and Techno Engineering Service Private Limited had submitted their bids separately for each section of the project. The project will have three sections that are to be completed in separate manners.

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